What are the steps?
- Take advice from your Accountant and/or Financial Planner
- Get an indicative approval for your loan
- Establish or review your SMSF
- Establish your Bare Trust / Security Trust and Trustee
- Find your property (if you haven’t already)
- Advise your solicitor / conveyancer that the property is to be purchased in the name of your Bare Trustee / Security Trustee
- Obtain formal loan approval – submit Trust documents for Lender’s review
- Exchange contracts with the vendor
- Sign and return loan documents
- Settle on the property
How do I get started?
Simply submit an Enquiry from our website and we will be in touch or you can call on 1300 88-00-18.
How does the structure work?
SMSF trust identifies a suitable investment property
- The SMSF Trust purchases the property but the property must be held on trust for the SMSF by another third party entity (i.e. Property Trustee)
- This means the legal owner of the property will be the Property Trust
- SMSF pays a deposit and borrows the balance from InShape Home Loans lender (the SMSF is also responsible for legal costs and stamp duty)
- InShape Home Loans lender lends to the SMSF. The lender has no recourse against the other assets of the SMSF other than the security property purchased
- The Property Trustee grants a real property mortgage over the property to the lender.
Features of the Structure
- The SMSF Trustee may be an individual or an incorporated non trading entity.
- Property must be held on trust by the Property Trustee. The Property Trustee must be an incorporated entity and separate to/from the SMSF Trustee. This is a strict requirement whilst there is an active loan against the property to remain compliant with the SIS Act.
- Every new property acquisition in the SMSF must have a new Property Trust.
- SMSF can deal with the property in “normal” day-to-day activities (e.g. lease, repair and sell). Note: structural renovations may not be allowable.
- Rents are paid directly to the SMSF
Property Trust Deed
This is the main document between the Super Trustee and the Property Trustee.
- This document confirms that upon the purchase of the Property, the Property Trust holds the legal interest in the Property on behalf of the SMSF Trust which holds the beneficial interest.
- The SMSF Trust is entitled to rental income from the property (if any) after meeting any expenses in relation to the property incurred by the Property Trust plus interest costs associated with the Loan.
- Upon repayment by the SMSF Trust to the Lender of the loan and discharge of mortgage, the SMSF Trustee may request the Property Trustee to transfer the legal title in the property to the SMSF Trust.
Security provided by borrower is limited to residential property purchased (via a Third Party Limited Recourse mortgage).
- Supporting security in the form of a supported or unsupported guarantee is mandatory from member(s) of the SMSF. If not taken, we cannot rely on superannuation contributions for servicing.
- Mortgage and guarantee from the property trustee limited to the property.
- Guarantee required from the member(s) of the superannuation fund
(Guarantee is modified to ensure guarantor(s) do not have recourse to the superannuation fund in the event of default / payment under the guarantee)
Code of Banking Practice and NCCP should not normally apply unless the transaction includes individual trustees
Documentation required to submit a lending application
- Business Finance AND Loan Application form
- Copy of SMSF Trust Deed (this is required to ensure that the superannuation fund may borrow/mortgage)
- Super Fund financials for the last 2 years
- If a new SMSF has been established, we require the last 2 years statements from the trustees to confirm contributions.
- Copy of the Contract of Sale and Transfer of Land
- Letter of Undertaking to pay Solicitor costs
- Copy of Property Trust Deed. This must include provision for:
- The borrowed funds being applied for the acquisition of the purchased property
- The purchased property is being held on trust for the SMSF
- The SMSF has a right to acquire legal ownership by making one or more payments after having acquired the beneficial interest.
- If a refinance request, the customer must provide the following information:
- Copy of contract for the original purchase which must be post September 2007
- Solicitor certification that the initial purchase conformed with the SIS Act 1993
- 6 months loan statements evidencing satisfactory repayment history
If SMSF financials are not available for Self Employed applicants some lenders require all entities financials and tax returns to complete a full group analysis to confirm the Group can afford to pay Super.
- Cannot use equity from other properties in the super fund however some lenders can release equity from properties outside of the superannuation fund.
- Investment property is required to potentially be income producing from settlement date.
- Purchase of residential property for investment
- Purchase of non-specialised commercial property for investment
- Refinance of loans for investment property acquired after September 2007. Loan must be an existing SMSF loan.
- Specialised commercial properties for investment can be considered on an exception basis provided they are compliant with the SIS Act.
This policy specifically excludes transactions excluded under the SIS Act such as:
- Non-commercial related party transactions
- Investment into ‘non income-producing’ or ‘ going concern’ type assets (i.e. vacant land, hotels, etc.)
- Finance for, or reliance upon, the development or refurbishment of the investment asset (i.e. property development).
- Needs to be arms length transaction for residential purchases – family
- Property development or house and land packages
- Rural (if non income producing)
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